No Competition Former Bechtel consultant portrays Halliburton bidding process as a "sham"

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No Competition Former Bechtel consultant portrays Halliburton bidding process as a "sham"

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Special to CorpWatch

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David Phinney

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Tuesday, September 14, 2004

A former Bechtel consultant who worked on a proposal for a sweeping oil reconstruction contract in Iraq in 2003 calls the government's competition a "sham" that was "rigged" from the start in favor of Halliburton subsidiary, KBR.

Appearing before a special panel of congressional Democrats on Sept. 10, the consultant, Sheryl Elam Tappan, said that she advised Bechtel to pull out as soon as she saw an official planning document (Restoration of Iraqi Oil Infrastructure Final Work Plan) in which the U.S. committed the work to KBR even before the contract was awarded. The work plan was withheld from Halliburton competitors until 2 weeks before proposals were due.

"Officials up and down the chain of command ignored our federal laws and regulations and the procedures that normally ensure fair play," she told the panel of the Army Corps of Engineers, which awarded the controversial contract through its Fort Worth office. She said she'd never before seen "the arrogant and egregious ways in which the Corps treated Halliburton's competitors."

After the competition, on Jan. 16, 2004, two contracts were awarded. Halliburton was assigned work in southern Iraq for a top value of $1.2 billion and a second, valued for as much as $800 million, went to Parsons Energy and Chemical Group and the Worley Group of Australia for similar work in northern Iraq. Both Parsons and KBR are headquartered in Houston.

As the largest contractor in Iraq, Halliburton's work with the Pentagon has been especially controversial.

Critics have accused the Pentagon of backroom deals that handed Halliburton work valued at billions of dollars in oil work without first holding full and open competitions. Since the spring of 2003, Pentagon auditors and members of Congress also complained that the company uses shoddy accounting practices, has a cavalier approach to containing costs, and repeatedly overcharged the government by hundreds of millions of dollars without justification.

The fact that Vice President Dick Cheney once headed Halliburton as CEO from 1995 to 2000, holds stock options presently worth an estimated $400,000 in the company and is receiving deferred compensation from Halliburton even while vice president, supplies additional cause for speculation about the firm and the Defense Department.

Halliburton's Washington lobbyist, Charles Dominy, is also a retired general who once served with the Army Corps of Engineers.

No one from the Defense Department appeared at the Democratic Policy Committee meeting to respond to Tappan's charges and a Bechtel spokesman said recently that the company dropped out of the competition because the company believed it would not lead to additional work.

The Army Corps of Engineers has consistently insisted during congressional hearings and to the news media that the process was "full and open."

Tappan lays out her scenario of the competition leading to Halliburton's landing of the contract in a self-published book, Shock and Awe in Fort Worth, which has been making the rounds among the company's critics in Washington.

The book carefully follows the threads leading from Halliburton's 10-year, multi-billion Logistics Civil Augmentation Program contract (LOGCAP) to provide Army support services, to the company's additional responsibilities in rebuilding Iraq's oil industry.

Key to that trail is an original $2 million task order under the LOGCAP to plan for possible oil well fires following the invasion of Iraq. The November 2002 project led to a second $60 million task order to preposition firefighting equipment and then a third agreement: a two-year contract worth up to $7 billion for restoring Iraq's oil infrastructure.

All three were awarded before the invasion of Iraq and the third contract, secretly awarded on March 8, 2003, was not made public until March 24.

The fact that these three agreements were awarded without first seeking competitive bids from other companies has generated cries of outrage from critics. Supporters, on the other hand, claim that the military faced an emergency situation and needed swift and decisive action.

A subsequent investigation of Iraq contracts by the Government Accountability Office, the investigative arm of Congress, found that the original firefighting task order violated federal acquisition regulations because it was unrelated to the intent of the original LOGCAP contract, which calls for providing backup support such as transportation, food preparation and base maintenance to the Army.

The GAO also observed that this original task order led directly to the $7 billion contract for restoring Iraq's oil infrastructure.

"DOD planners believed early on that issuance of this task order (for firefighting) would result in Kellogg Brown & Root (KBR) being uniquely qualified to initially execute the plan for restoring the Iraqi oil infrastructure," GAO found.

Questions over the non-competitive and secret award of the oil infrastructure contract was first voiced by the top Democrat on the House Government Reform Committee, Rep. Henry Waxman. More than a month later, the Army Corps announced that the oil infrastructure contract was only temporary and would be put into competition at the "earliest opportunity," according to Lt. Gen. Robert B. Flowers, the Corps commander at the time.

But the resulting competition proved to be a farce, Tappan claims in her book. Citing numerous documents associated with the competition, Tappan shows announcements by the Corps about the scope of work for repairing Iraq's oil fields and pipelines repeatedly changed.

The Corps also routinely delayed or compressed deadlines, and while in July 2003 the original competition was portrayed as being for the "overall restoration of Iraq's oil infrastructure," the actual work turned out to be far less than the $7 billion awarded to Halliburton's KBR.

KBR also took an active role in assisting the Corps of Engineers develop the Oil Infrastructure Final Work Plan for the competition earlier that spring but the Corps didn't provide that work plan to competing companies until August 1, just 13 days before proposals were due despite numerous opportunities to do so, Tappan said.

"So complete was the Pentagon's committment to Halliburton that KBR was embedded with the Corps, the Coalition Provisional Authority and the Ministry of Oil in every function shown in the organization charts for the plan," she said.

The federal acquisition regulations require that such material be made avialable to all bidding companies "no later than the next general release in order to avoid creating an unfair advantage," she said.

Despite there being ten general releases between the time the Corps of Engineers and Halliburton developed the details of the plan and August 1, "not a single release mentioned the existence of the plan or any of its contents," Tappan recounted, adding that all during this period, Halliburton continued performing reconstruction work under the $7 billion contract that was in the process of bing re-competed and not re-awarded until January 16, 2004.

The close cooperation between the Corps of Engineers and Halliburton manifested itself at a July meeting where the Corps, Halliburton, the Coalition Provisional Authority and the Iraqi Ministry of Oil gathered to discuss the final work plan and how it would be executed. That gave an inside advantage to Halliburton that other competitors didn't have, Tappan finds.

A similar three-day meeting in August took place at MacDill Air Force Base near Tampa, Fla., according to the New York Times, leading some business executives to privately grouse about possible favors to Halliburton. Those companies that did attend were only "commercial contractors currently working in Iraq," a spokesman for the United States Central Command told the newspaper.

Misrepresentations have been ongoing ever since the first task order for fighting oil well fires was awarded, Tappan claims in her book. While the Pentagon first reasoned that Halliburton's KBR was the best qualified company because the firm had fought the 320 fires in Kuwait in 1991 after the Gulf War, Tappan finds the rationale to be nonsense.

"It was Bechtel that managed the entire firefighting and oil field reconstruction program in Kuwait -- in half the time experts said it would take," Tappan said.

Halliburton spokeswoman Wendy Hall disputes this claim. "Our client was the Kuwait Oil Company," she said. "Halliburton crews helped bring 320 wells in Kuwait under control in less time than was expected following the Gulf War. More than 190,000 work hours were incurred on this project without a lost-time accident. Originally scheduled as an 18-month project, Halliburton's crew assisted in extinguishing 90 percent of the blowouts within one year of the beginning of operations."

Some believe Halliburton may be exaggerating its role. In April 7, 2003 interview with the Engineering News Record, a former president of Bechtel Construction, Terry Farley, said that Halliburton's role in Kuwait was minimal and that the company had "put out no fires -- zero."

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